FISCAL YEAR 2021-2025

FISCAL YEAR 2021-2025

FIVE-YEAR FINANCIAL OUTLOOK

Kevin L. Faulconer

Mayor

Kris Michell

Chief Operating Officer

Rolando Charvel

Chief Financial Officer

Tracy McCraner

Department of Finance Director and City Comptroller

Adrian Del Rio

Assistant Director

Nicole Chalfant

Financial Operations Manager

NOVEMBER 2019

Vanessa Montenegro

Principal Accountant

NOVEMBER 201

Fiscal Year 2021-2025 Five-Year Financial Outlook

Disclaimer:

The City files its disclosure documents, including official statements, audited financial statements, comprehensive annual financial reports, annual financial information, material event notices, and voluntary disclosures with the Municipal Securities Rule Making Board's Electronic Municipal Market Access ("EMMA") system. The Five-Year Financial Outlook is not filed on EMMA and investors should not rely upon the Five-Year Financial Outlook to make any investment decisions. The City will provide the Five-Year Financial Outlook to the rating agencies, its bond insurers and other interested parties, and welcomes and encourages their careful review of this document. Readers are cautioned that the numbers presented in this document are the City's best estimate for the next five years based on facts and factors currently known to the City and do not represent actual performance. No representation is made by the City that, as of the date this document is read, there is not a material difference between the City's actual performance as of such date and the financial data presented in the FiveYear Financial Outlook. Certain statements in this document constitute forward-looking statements or statements which may be deemed or construed to be forward-looking statements. Forward-looking statements involve, and are subject to known and unknown risks, uncertainties and other factors which could cause the City's actual results, performance (financial or operating) or achievements to differ materially from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. All forward-looking statements herein are expressly qualified in their entirety by the abovementioned cautionary statement. The City disclaims any obligation to update forward-looking statements contained in this document.

2 The City of San Diego | Department of Finance |

Fiscal Year 2021-2025 Five-Year Financial Outlook

TABLE OF CONTENTS

EXECUTIVE SUMMARY......................................................................................5

Summary of Key Financial Data........................................................................................................................5 Report Outline ....................................................................................................................................................7

BASELINE PROJECTIONS ..................................................................................9

Baseline General Fund Revenues.....................................................................................................................9 Property Tax ........................................................................................................................................10 Sales Tax ..............................................................................................................................................15 Transient Occupancy Tax (TOT) ........................................................................................................19 Franchise Fees.....................................................................................................................................21 Property Transfer Tax ........................................................................................................................23 Licenses and Permits .........................................................................................................................24 Cannabis Tax .......................................................................................................................................24 Fines, Forfeitures, and Penalties.......................................................................................................25 Revenue from Money and Property.................................................................................................26 Revenue from Federal and Other Agencies ....................................................................................26 Charges for Services...........................................................................................................................27 Other Revenue ....................................................................................................................................28 Transfers-In .........................................................................................................................................28

Baseline General Fund Expenditures ............................................................................................................31 Salaries and Wages.............................................................................................................................32 Retirement Actuarially Determined Contribution (ADC) ...............................................................33 Employee Flexible Benefits ...............................................................................................................34 Other Post-Employment Benefits (OPEB)........................................................................................35 Workers' Compensation ....................................................................................................................35 Supplemental Pension Savings Plan (SPSP) ....................................................................................36 Other Fringe Benefits .........................................................................................................................37 Supplies ................................................................................................................................................ 38 Contracts .............................................................................................................................................. 38 Information Technology ....................................................................................................................39 Energy and Utilities.............................................................................................................................40 Reserve Contributions .......................................................................................................................41 Other Expenditures ............................................................................................................................42 Charter Section 77.1 ? Infrastructure Fund.....................................................................................42

CRITICAL STRATEGIC EXPENDITURES ...........................................................45

Total Critical Strategic Expenditures..............................................................................................................45 City Clerk............................................................................................................................................................46 City Treasurer ...................................................................................................................................................46 Citywide Program Expenditures.....................................................................................................................47 Environmental Services ...................................................................................................................................47

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Fiscal Year 2021-2025 Five-Year Financial Outlook

Fire-Rescue ........................................................................................................................................................48 Fleet Operations ...............................................................................................................................................49 Homeless Programs and Services..................................................................................................................50 Information Technology ..................................................................................................................................51 Library ................................................................................................................................................................51 Parks and Recreation .......................................................................................................................................52 Performance and Analytics .............................................................................................................................52 Police ..................................................................................................................................................................53 Real Estate Assets ? Facilities Services ..........................................................................................................54 Department of Sustainability..........................................................................................................................54 Transportation and Storm Water...................................................................................................................55

POTENTIAL MITIGATION ACTIONS ...............................................................57

One-Time Resources........................................................................................................................................57 Budget Reductions ...........................................................................................................................................57

OTHER ASSUMPTIONS AND CONSIDERATIONS ...........................................59

Ballot Measures ................................................................................................................................................59 MOUs and ADC .................................................................................................................................................59 Recession ........................................................................................................................................................... 59

CONCLUSION ..................................................................................................61

Attachment 1: FY 2021-2025 Five-Year Financial Outlook ............................................................................. i Attachment 2: One-Time Resources and Expenditures ............................................................................... iii Attachment 3: New Facilities............................................................................................................................. v

4 The City of San Diego | Department of Finance |

Fiscal Year 2021-2025 Five-Year Financial Outlook

EXECUTIVE SUMMARY

The City of San Diego Fiscal Year 2021-2025 Five-Year Financial Outlook Report (Outlook) is a longrange fiscal planning guide and serves as the framework for the development of the Fiscal Year (FY) 2021 Adopted Budget for the General Fund. The purpose of the Report is to address and prioritize the City's long-range needs as forecasted. The Outlook focuses on baseline revenues and expenditures, including quantifying new costs that are critical to accomplishing the City's strategic goals over the next five-year period. These goals include:

? Provide high quality public service ? Work in partnership with all communities to achieve safe and livable neighborhoods ? Create and sustain a resilient and economically prosperous City with opportunity in every

community The Outlook is a planning tool to assist in budget decisions related to the allocation of General Fund resources required to meet the City's strategic goals that are critical to core services; therefore, should not be considered a budget. The Outlook does this by estimating baseline revenues and expenditures for current service levels and then integrating critical strategic expenditure requests that are the highest priority and reflect the shared goals of the City Council and the Mayor. The Outlook provides the City Council, key stakeholders, and the public with information at the start of budget process to facilitate a discussion regarding the coming year's General Fund budget allocations. To the extent projected expenditures exceed estimated revenues in any given year of the Outlook, the City will address these shortfalls through mitigating actions as described in the Potential Mitigation Actions section of the Report. As required by the City Charter, the Mayor will present a balanced budget for the City Council's consideration in April 2020. The decisions impacting the FY 2021 budget will likely have an impact on the entire outlook period.

Summary of Key Financial Data

Overall, the Outlook forecasts revenue growth to soften, increasing moderately over the upcoming five years. Major General Fund revenues are anticipated to increase in each year of the Outlook; however, the rate of growth decreases in the outer years of the Outlook. The Outlook also projects increases in nearly all expenditure categories. Based upon baseline projections, growth in ongoing revenues is anticipated to outpace growth in ongoing expenditures during the outlook period; however, a short-term structural shortfall is forecasted once the following key factors are accounted for:

? Moderate growth in revenue ? Projected growth in expenditures ? Reserve Contributions ? Critical Strategic Expenditures

5 The City of San Diego | Department of Finance |

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